Conference on Financing for Development

Statement by Mr. Abdoulie Janneh, UN Under-Secretary-General and Executive Secretary of ECA

Accra, Ghana
30 May 2007

Excellencies,

Distinguished delegates,

I would like to start by thanking His Excellency, Mr. John Kufuor, President of the Republic of Ghana, as well as the Government and people of Ghana for hosting this important Ministerial meeting and for the African hospitality and welcome that has been accorded to the delegation of the Economic Commission for Africa (ECA) since our arrival in Accra.

Honourable Ministers,

A key development challenge that Africa faces today is the mobilization of domestic and international resources to enhance productive investments, boost growth, and reduce poverty. This critical role of finance in the development process was recognised by world leaders in the 2002 Monterrey Consensus on Financing for Development. It was also one of the reasons why you decided to organise annual Ministerial Meetings on Financing for Development. As the second in the series started in Abuja last year, this meeting demonstrates your commitment to the objective of enabling Africa to finance its development. I pledge ECA's continued support for organization of these meetings because we believe that improving access to finance will play a critical role in moving the African development agenda forward.

As you are well aware, available evidence indicates that African countries have very serious financing gaps. A substantial part of the development financing gap in African countries should preferably be closed through an increase in domestic savings. However, for several of our countries, this is not possible in the short run due to a low income base and an underdeveloped financial sector, which makes it difficult to effectively mobilize domestic savings. Since African countries also have difficulties attracting significant private capital flows, external finance in the form of Official Development Assistance (ODA) seems to be the most likely source to fill this gap. The international community has recognised this fact and indeed several pledges have been made to African countries in recent years.

The annual meetings on Financing for Development therefore provides an opportunity for you, Ministers, to take stock of progress made since the Gleneagles Summit and to find workable mechanisms for translating donor commitments into action. In addition, it provides a useful platform for deliberations on the challenges that Africa faces in the area of development finance and will enable Ministers to identify and adopt concrete measures to deal with the financing gaps of the region. Success in closing these gaps will, to a large extent, determine whether or not the region will meet the Millennium Development Goals (MDGs) by the 2015 deadline.

Excellencies,

Distinguished delegates,

Our theme this year “ Infrastructure for Growth: The Energy Challenge ” reflects the widespread acknowledgment that access to clean and reliable energy supply is necessary for accelerated economic growth and sustained poverty-reduction. It enhances the provision of clean water as well as health and education services, which are essential for poverty reduction and eradication. However, Africa suffers significant energy deficit. Even though it represents 13 percent of the world's population and produces 7 percent of global modern energy, it only accounts for 3 percent of modern energy consumption.

According to a recent report by the World Energy Council, “Africa is the least illuminated continent of the world” as less than 20 percent of its population has access to electricity. This is disturbing given the huge hydro-electric power potential of the region. The economic consequences of poor access to electricity in the region are quite high. For instance, the rural poor spend as much as 20-30 percent of their monthly income on fuel wood, charcoal, and kerosene, thereby reducing their ability to satisfy other basic needs.

If African countries are to meet the average 7 percent growth rate deemed necessary to meet the MDGs, they must increase the consumption of modern energy as there is abundant evidence of a strong and positive correlation between per capita Gross National Product (GNP) and per capita energy consumption.

The lack of access to electric power, and modern energy in general, also has a negative effect on productivity and limits the economic opportunities available to African countries. This is compounded by the poor state of existing infrastructure, which creates the dual challenge of finding resources for maintenance of existing facilities and also to build new power plants. Consequently, improving access to modern energy is a necessary condition for boosting growth and reducing poverty in the region.

It should be noted, however, that energy will enhance the overall economic development goals of African countries only if it is supplied in sufficient quantity, at an affordable price, and in a form and quality that support human well-being without threatening the environment. Therefore, African governments must pay attention to the environmental consequences of various options for enhancing the provision of energy services in the region. Other key challenges facing the energy sector include: the weak development of infrastructure; the high capital cost of energy projects; lack of technical expertise; poor energy service quality and inefficient technologies; and lack of financing and investment for energy projects.

Excellencies,

Distinguished delegates,

As you are well aware, African countries have difficulties attracting financial resources for investments in the energy sector. Several attempts have been made to estimate the energy financing needs of the region. The estimates vary widely depending on the source, the period considered, and the methodology adopted. For example, the International Energy Agency is of the view that Africa needs $250 billion of investments in power generation, transmission and distribution between 2001 and 2030 to ensure universal electricity access. The estimates by the Commission for Africa also suggest that for Africa to sustain a 7 percent average growth rate, an additional US$20 billion per year would have to be spent on infrastructure until 2015. We hope that a significant proportion of these funds will be allocated to the energy sector.

The key conclusion from these estimates is that Africa currently has a huge energy financing gap which has to be filled to improve prospects for attaining the MDGs by the 2015 deadline. Consequently, one of the key questions that we have to answer at this meeting is how to fill the financing gap.

At the national level, governments must take adequate steps to mainstream energy development into national budgets and development strategies to ensure policy coherence. Furthermore, they must take appropriate steps to enhance the mobilization of domestic savings, reduce capital flight, and improve the investment environment. There is also the need for more efforts to harness the potential of public-private partnership as an effective mechanism for finance and development of energy infrastructure. Commercialization should also be considered as a way to improve the technical and financial performance of power utilities. However, it must be complemented with appropriate pricing policies to ensure that it does not lead to less access by the poor to energy services.

At the regional level, there is the need to intensify and fast-track existing efforts to enhance regional cooperation in the provision of energy services and infrastructure. The Regional Economic Communities are already increasing their efforts to promote regional power pools and interconnected electricity grids to enhance cross-border electricity trade and foster regional economic integration. This is a welcome development because regional energy integration is the key to unlocking Africa's energy potential. It will lead to improved security of supply, better economic efficiency, enhanced environmental quality, and a wider deployment of renewable energy resources.

At the international level, our development partners have to scale up the volume of aid to the energy sector and infrastructure development. They also have to ensure that they honour existing commitments to African countries in this area. It is clear that in the short-run, African countries cannot mobilize the required resources and so a substantial increase in ODA is needed to bridge the financial gap. International action is also needed to deal with climate change, which has negative effects on water levels and the ability of African countries to generate hydro-electric power.

Excellencies,

Distinguished delegates,

I would like to conclude by sharing some of ECA's efforts to support Africa in the quest to overcome its development finance and energy challenges. In the area of development finance, we recently conducted a survey of African countries to get their views on the degree of progress in the implementation of the Monterrey Consensus. The results of this survey will be made available to member States as soon as they are ready.

As you are well aware, ECA has been an important contributor to policy innovations and advocacy in Africa. In recent years, we have scaled up our work on energy policy. For example, we have just completed a study on assessment of power sector reforms in Africa. In addition, at the recent Conference of African Ministers of Finance, Planning and Economic Development, we underscored the need for more public sector investment in infrastructure and energy. ECA continues to advocate and support Africa's regional integration efforts and energy development initiatives. We believe that achieving a more regionally integrated Africa would have a positive impact on the development of energy infrastructure in Africa, and greatly enhance energy security on the continent.

Consistent with our work in this area, we will support the implementation of the outcome of this Conference in any way that you, the Ministers, deem fit.

I thank you for your attention and wish you fruitful deliberations.